crvUSD

crvUSD is a dollar-pegged stablecoin issued by Curve Finance. It uses a collateralized debt position model: users deposit an asset such as ether or a liquid staking token, and mint crvUSD against it, repaying to unlock their collateral.

What makes crvUSD distinctive is not the borrowing model but its liquidation mechanism, called LLAMMA, short for lending liquidating automated market maker algorithm. In a conventional lending protocol, a position is either safe or liquidated: once collateral falls below a threshold, a liquidator repays the debt and seizes the collateral in a single event, often at a significant loss to the borrower.

Soft liquidation

LLAMMA replaces that with a continuous process. Collateral is placed into a specialized automated market maker across a price band. As the collateral price falls through that band, the mechanism gradually converts the collateral into crvUSD. If the price recovers, it converts back. The borrower is therefore de-risked progressively rather than being wiped out at a single trigger point.

The trade-off is that moving in and out of the position through the band incurs costs, so a borrower whose collateral price oscillates repeatedly will experience gradual losses. Hard liquidation still exists as a backstop if the price falls far enough below the band.

Supply and peg management

crvUSD has no fixed maximum supply, with roughly 214 million tokens outstanding. The peg is managed through borrowing rates and through peg keeper contracts that can mint or burn crvUSD into designated pools to absorb imbalances.

The token is available on Ethereum and several other networks, and it integrates closely with Curve's existing stablecoin liquidity.